Our First Half-Century Part 8

This increase chiefly arose from the heavier duties levied under the protectionist Customs tariff of 1888; but in 1889-90 there was an almost equivalent shrinkage in both Customs and total revenue. Bad times partly accounted for the subsequent inelasticity of Customs receipts, for not until 1895-6 were the total revenue figures of 1888-9 again touched.

The year 1889-90 was characterised by a deficit of 483,979, for the drop of 402,857 in revenue and the increase of 197,969 in expenditure dislocated the finances, and caused the retirement of the Morehead Government after an ineffectual attempt to impose a general tax of 5 per cent. on all property, both real and personal. The coalition Griffith-McIlwraith Administration followed, but could not in such a time of value shrinkages materially increase revenue, while expenditure was thought to be irreducible. Despite a Loan Act for 1 millions pa.s.sed in 1888-9, to provide for works temporarily met by floating Treasury bills during the two preceding years, another large loan was authorised in 1890, its total being nearly 3 millions sterling. This money was needed to retire debentures maturing on 1st July, 1891, amounting to 1,170,950, and no less than 422,850 deficiency loss on the loans of 1882, 1884, and 1889, thus leaving little more than 2 millions for railway and harbour works. This 3 million Loan Act did not receive the Royal a.s.sent until December, 1890, and the stock was issued a few months later at a most unfortunate time. The monetary tension which culminated in 1893 was already felt in the London market, and the credit of Queensland had become much impaired by the fact that during the preceding decade (1880-81 to 1889-90) the colony's obligations had increased by 16,706,834, bringing the funded public debt up to 28,105,684--nearly 70 per head of the population--while railway net earnings were steadily dwindling.

[Ill.u.s.tration: BARRON GORGE, BELOW THE FALLS, CAIRNS RAILWAY]

The cable soon flashed the unwelcome news that only 1,554,834 was subscribed. After some difficulty a Stock Exchange syndicate was formed to underwrite 1,182,400 of the balance, the price realised for the whole amount taken up averaging 87 6s. 1d. per 100 of 3 per cent. stock. Thus the net proceeds of the loan of 3,704,800 were only 3,234,376, a depreciation loss of 470,424. The interest charge on this new loan was 129,668; so that the interest, while nominally 3 per cent., was really just 4 per cent. on the money received, and, in addition, at due date (1930), 470,424 depreciation will have to be made good. But the tragedy did not end there, for the money borrowed, or the greater part of it, had not reached the Treasury in 1893, but ranked among the "suspended bank deposits" which then paralysed both Government and private depositors.

That the time chosen for going on the money market was not opportune may be gathered from the fact that in 1889 Queensland 3 per cent.

stock had brought 96 0s. 11d. per 100, and in 1894--three years after the forced sale at 87 6s. 1d. in 1891--an issue of our stock of the same denomination brought 98 14s. 0d. per 100. It may be noted that the Queensland loan of 1890-91 was the first underwritten Government loan issued by an Australian colony, though since that time all Government loans have been underwritten. Heavy as our sacrifice in 1891 may have been, it was infinitely less disastrous than making default must have proved; and perhaps after all the experience gained was worth its cost, for, although the colony staggered under the blow, its progress was checked only for the time.

In 1890 an amending Audit Act was pa.s.sed--Sir Thomas McIlwraith being then Treasurer--section 4 of which made the important provision that it should not be lawful for the Colonial Treasurer to expend any moneys standing to the credit of the Loan Fund Account except under the authority of an annual or special Appropriation Act, in like manner as moneys were expended out of the Consolidated Revenue Fund for the current expenses of government. By section 6 it was provided that, when it was necessary to expend for any work money in excess of the appropriation, then, if such sum were included in any Appropriation Act, the Governor in Council might authorise the additional expenditure from the Loan Fund. By section 8, annual Loan Estimates, specifying the nature of the work proposed, were to be submitted, as in the case of the Estimates of ordinary expenditure.

This Act was pa.s.sed to avoid the evil of placing large amounts of borrowed money at the uncontrolled disposal of the Ministry of the day.

CHAPTER IV.

PUBLIC FINANCE (1893-1898).

Sir Hugh Nelson at the Treasury.--Credit of Colony Restored.

--a.s.sistance to Financial Inst.i.tutions and Primary Industries.

--Savings Bank Stock Act.--Public Debt Reduction Fund.

--Treasurer's Cautious and Prudent Administration.--Money Obtained in London at a Record Price.

When the banking crisis occurred in 1893, Mr. (afterwards Sir) Hugh Nelson, who had previously held office with distinction as Railway Minister for about two years, reluctantly took charge of the embarra.s.sed Treasury. Entering Parliament after the general election in 1883, he had from the first given evidence of more than common knowledge of public finance. Mr. Nelson was an exceedingly modest man, and an indifferent public speaker at best; but he possessed courage, thoroughness, and scholarly knowledge. In public matters he always aimed at taking the line of least resistance; but knowing what he knew in March, 1893, his a.s.sumption of office as Treasurer must be regarded as an act of heroism dictated by regard for the public welfare.

Quietly and un.o.btrusively he worked, refusing all invitations to appear on public platforms, and while affecting contempt for politicians who constantly apostrophised "the people," he determined to set the affairs of the colony straight. Revenue at that time had almost touched bottom, and was very inelastic; and Mr. Nelson followed the example of his immediate predecessor in keeping a tight hand upon expenditure. For 1892-3 there had been a reduction of outlay of about 70,000 only, as compared with the preceding year, the June deficit having been reduced to 111,676; but in the next year he realised rather less revenue, yet reduced expenditure by 206,000, closing the year with a small deficit of 8,467. As this was the time in which most commercial and financial disaster was suffered from the crisis, this economy was a feat worth accomplis.h.i.+ng, although the drastic reduction of expenditure tended to aggravate the crisis by delaying the restoration of confidence. After 1893-4 followed six surpluses.

In the midst of the bank reconstructions of 1893 there had been a general election, and Parliament met on 25th May. Between then and 18th October, 1893, Mr. Nelson, as Treasurer in the McIlwraith Ministry, pa.s.sed those financial measures which were the greatest achievements of his career. An unpopular measure was his Civil Service Special Retrenchment Act, but it was imperative, and civil servants were indeed fortunate, when so large a number of their friends in private life were left dest.i.tute, in being able to draw their diminished salaries month by month. The Queensland National Bank Limited Agreement Act enabled that inst.i.tution to resume business, though the public sacrifice was great. Acts were also pa.s.sed for encouraging meat and dairy works; for advancing guaranteed loans by the Treasury to sugar works companies; for Treasury advances upon the notes of suspended joint stock banks; for the issue of Treasury notes, made legal tender throughout the colony save by the Treasury; and for the imposition of a yearly tax of 10 per cent. on notes issued by banks. In the same session was pa.s.sed an Act for giving relief to public depositors, such as treasurers of hospitals and other public inst.i.tutions, by making Treasury advances upon the amount of their locked-up deposits.

Another important measure of this period was the Government Savings Bank Stock Act of 1894, under which any savings bank depositor may exchange his deposit for 10, or any multiple thereof, of Government stock redeemable in 1945, and bearing not more than 3 per cent.

interest. In 1897 the amount of such stock issuable was increased from 1,000,000 to 2,000,000. The object of this measure was to give depositors the opportunity of making investments in small amounts of Government stock, for which there would always be a buoyant market in the event of cash being required; and also to safeguard the Treasury by reducing the amount of money held on account of savings bank deposits repayable at call. In 1897 the total deposits did not exceed 2 millions; to-day they total over 5 millions. It is therefore satisfactory to note that the Treasurer (Mr. Hawthorn) early in the current year made arrangements for enlarging the sale of savings bank stock in the manner intended by the author of the Act.

In 1895 Mr. Nelson pa.s.sed the amended Audit Act under which, if it appears by the Treasurer's annual statement that there is a surplus of receipts for any financial year, the money shall, before the 31st day of December following, be paid to the trustees of the Public Debt Reduction Fund created by the Act, and by them applied, first to the purchase of Treasury bills, and then to the purchase of inscribed stock at the current market price, stock so purchased to be cancelled.

As a Treasurer with a deficit is bound to make provision for its liquidation at the end of a financial year, the effect of the Act has been to start every year with a clean sheet. By this practice an ingenious Treasurer is deprived of the opportunity of juggling with acc.u.mulated surpluses.

[Ill.u.s.tration: ON THE ROAD TO MARKET, CENTRAL QUEENSLAND]

[Ill.u.s.tration: FAT CATTLE, CENTRAL QUEENSLAND]

In April, 1898, when Sir Hugh Nelson retired from active politics, he had just completed five years' service as Treasurer. During that time he had gone to the London money market only twice, and had issued stock to the amount of only 3 millions. Of that sum, moreover, the 2 millions asked for in 1894 was for retiring Treasury bills, and for the liquidation of the deficit on account of previously issued loans.

In 1896 the Loan Act totalled 2,324,480, though it was not all placed by Sir Hugh Nelson. It provided for further railway extensions, and included half a million sterling for loans in terms of the Local Works Loans Act under the Sugar Works Guarantee Act; 600,000 was applied to the purchase at par of savings bank stock for cancellation, only 1 millions being placed on the London market. Of these two loans issued subsequent to the 1893 crisis, the first, bearing 3 per cent.

interest, realised 98 14s. 0d. net per 100 of stock, and the other, floated in 1897, bearing 3 per cent., brought 95 15s. 10d., the record price for money obtained by the issue of Queensland Government stock in London.

CHAPTER V.

PUBLIC FINANCE (1898-1903).

The Philp Ministry.--Large Surplus.--Loan Acts for Seven and a-half Millions Sterling.--Drought Disasters and Sacrifices for Federation.--Acc.u.mulated Revenue Deficits of over 1,000,000.--Rebuff on London Stock Exchange.--Resignation of Philp Ministry.

When Mr. Philp took charge of the Treasury in March, 1898, the credit of the colony appeared to have been fully restored. True, the funded public debt had grown to 33 millions, but the population had also increased to 484,700, so that the public debt proper was slightly more than 69 per head. The year 1897-8 closed with the small surplus of 20,724 at the Treasury, and revenue was steadily improving. In June, 1899, Mr. Philp had the largest surplus realised for seventeen years, nearly 150,000, but then an era of drought began. Still revenue continued to advance until the establishment of federation in 1901, when financial trouble was accentuated. The year 1899-1900 had shown a small surplus of 47,789, to be followed by three successive deficits aggregating 1,151,469. Mr. Philp, an old colonist, an experienced business man, and with a full knowledge of its varied resources, had unbounded confidence in the future of the State. Soon after he became Premier at the close of 1899, he essayed a bold public works policy, and during his first three years of office he induced Parliament to sanction the borrowing of nearly 7 millions sterling. But he did not issue the whole of the last 2 millions. Owing princ.i.p.ally to the South African war, colonial stocks were not high in favour in 1900, and the Queensland Government, acting on the best advice, decided to call for tenders for the 1,400,000 of 3 per cent. stock placed on the English money market in July of that year. The loan only realised 91 5s. 1d. per cent., about the same price that was obtained by New South Wales and West Australia in the same year. Of the balance of the loan, 900,000 was taken up in Queensland by the trustees of the Government Savings Bank at 97 per cent., and 46,600, sold locally and bearing 3 per cent. interest, realised 99 10s. 8d. net, the local market not being affected by the adverse influences and the choice of investments which operated in London. In October, 1901, for 1,374,213 offered in London at 3 per cent., the extremely low price of 88 12s. 4d. was obtained; and in 1903, when the then Treasurer (Mr. T. B. Cribb) again sought to enter the London market with 3 per cent. stock, he could only place 750,000 worth at the low rate of 92 19s. 11d. Times had indeed changed, and for the moment the State was practically excluded from the London money market. The balance of the loan has been, and is being, issued in Queensland, about 456,000 being still unsold.

The year 1899-1900, from the revenue standpoint, was the record year of the century. Wool brought extremely high prices in London, and loan expenditure had been maintained during the previous two years at an average of a little over 1,000,000 per annum. For the next year, one-half of which was subsequent to the proclamation of the Commonwealth, revenue showed a decline of nearly half a million sterling, although loan outlay had been increased rather than lessened. Two reasons could be a.s.signed for this shrinkage--a bad season in the West, and the dislocation of accounts resulting from federation. Still, in 1899-1900, the expenditure from revenue was fully maintained, with the result that on 30th June, 1901, the deficit exceeded half a million.

In the next year, 1901-2, there was a further decline of about half a million in revenue, arising (1) from one-fourth of the State's Customs revenue and the whole of its postal revenue being retained by the Commonwealth, and (2) from the spa.r.s.e rainfall and the heavy drop in London wool prices. Thus, although the apparent expenditure showed a decline of about 650,000 due to the cost of the transferred departments being defrayed by the Commonwealth, the financial year ended with a deficit of 431,940. The year 1902 was the most disastrous with respect to rainfall that Australia ever experienced, and the drought struck Queensland with cruel intensity. The revenue of 1902-3 was maintained at nearly the level of the previous year, good rains having fallen early in 1903, while the expenditure was cut down by about a quarter of a million; yet there was a further deficit of 191,341, despite the fact that an income tax had been imposed and a Public Service Special Retrenchment Act pa.s.sed which resulted in a saving of 87,000.

The Philp regime practically ended with an acc.u.mulated deficit, as above mentioned, of 1,151,469; for, about two months after the close of the financial year 1902-3, the Ministry were compelled by a schism in their party to resign office. They had been long popularly stigmatised as the "Continuous Government." The work of the coalition of 1890 having been accomplished, Ministers had exhausted their popularity; yet the probability is that but for the financial debacle the end would not have come quite so soon. The drought having by this time broken, a return of prosperity was naturally expected; but on the one hand Ministers had made enemies by severe retrenchment, and on the other hand they were blamed for having failed to balance their budget.

When Parliament met on 21st July, 1903, Mr. Philp appeared still to command a working majority--though somewhat diminished by the general election of 1902-3 compared with that which had followed him for three years previously. But on the 8th of September the Treasurer, Mr. T.

B. Cribb, carried his taxation resolutions in Committee of Ways and Means, after an acrimonious debate, by a majority of only two votes in a House of sixty-five, several prominent Government supporters voting with the Noes. Mr. Philp then moved the adjournment of the House, and next day announced the resignation of his Ministry.

[Ill.u.s.tration: MAROOCHY RIVER AND NINDERRY MOUNTAIN, NORTH COAST RAILWAY]

CHAPTER VI.

PUBLIC FINANCE (1903-1909).

The Morgan-Kidston Ministry.--Economy in Revenue Expenditure.--Great Reduction in Loan Outlay.--Equilibrium Established at the Treasury.--Retrenchment and Taxation.

--Improvement of Finances.--A Record Surplus for Queensland.

--Land Sales Proceeds Act.--Abstention from Borrowing.

--First Loan Floated since 1903.--Sound Position of Queensland.--Value of State Securities.--Reproductiveness of Railways Built out of Loan Money.--Public Estate Improvement Fund.--How Recourse to Money Market has been Avoided.

On the 15th September, 1903, the Speaker's resignation was announced, and on the 17th Mr. (now Sir) Arthur Morgan announced the formation of a new Ministry with himself as Premier, his colleagues including the leader, (the late Mr. W. H. Browne) and another prominent member of the Labour party (Mr. W. Kidston). The new Ministry came in expressly to restore the financial equilibrium, the Treasurer being Mr. Kidston.

Retrenchment became the order of the day, although the Estimates of the late Government were adopted, having regard to the fact that the first quarter of the financial year had practically expired. The pruning-knife was applied with vigour, and loan expenditure rapidly lessened, although existing railway contracts had of course to be completed.

On 30th June following, revenue showed an increase of 69,000, while expenditure had been reduced by 110,000, the financial year ending with a deficit of only 12,424. Loan expenditure had been brought down to 603,805, a reduction of no less than 418,600 compared with the previous year. In the middle of the session of 1904 the Premier advised a dissolution, which was granted; and after the general election the Ministry returned in such strength as to warrant Parliament in treating their policy, especially the financial part of it, as practically a mandate from the const.i.tuencies.

In 1904-5 the revenue being within 41 of the amount of the preceding year, while the expenditure was about 26,000 less, a surplus, the first for five years, was recorded for the nominal sum of 13,995.

Seeing that loan expenditure had been reduced to less than a quarter of a million, that general retrenchment had been carried out, and that a recovery of trade and industry was not yet clearly apparent, the result must be deemed highly satisfactory; also, the Treasurer refused, after his first year of office, to continue the practice of charging to loan fund the amount spent by the Commonwealth Government on new works and buildings. The amount was not large, but even the 20,000 to 30,000 per annum so expended would, if transferred to loan, have improved the appearance of the State revenue account.

In 1904 the obnoxious but necessary Special Retrenchment Act was re-enacted for the nine months of the financial year still remaining, the rate of deduction being diminished by one-half, while provision was made that any surplus revenue for the financial year should be paid to the public servants. The year closed with a surplus of 13,995, which was at once distributed _pro rata_ among the retrenched officers. The continuation of the Act was not popular among public servants, but it was deemed necessary in the interests of the wider community; and, as the net result was that a public officer only lost 7s. 6d. for every 1 deducted from his salary during the two previous years, it can hardly be considered unfair, having regard to the losses sustained by the general public during the same period. Another unpopular measure was the Income Tax Amending Act, which exempted from taxation incomes of 100 and under, but in regard to the larger incomes somewhat increased the taxation then levied. In 1906 a further Income Tax Amending Act was pa.s.sed, adding to the taxation in some cases, but raising the exemption to 160 and granting an exemption of 120 on incomes between 160 and 200. In 1907 another amendment of the Act increased the exemption to 200 on all incomes, and reduced certain imposts, which had the effect of relinquis.h.i.+ng revenue to the extent of 40,000 to 50,000 for the year. But times had then improved, and the Treasurer could afford this grateful relief to the poorer cla.s.ses of the community.

Early in 1906, owing to the death of Sir Hugh Nelson, Mr. Morgan retired from the Ministry, Mr. Kidston becoming Chief Secretary in his stead, while still retaining the Treasurers.h.i.+p. Mr. Morgan then accepted the Presidency of the Legislative Council. In the year 1905-6 the revenue had become buoyant, the increase for the year being 258,124. The expenditure had also increased by over one-half that amount, the year closing with the surplus of 127,811. Loan outlay also showed an increase, totalling nearly 300,000. In 1906-7 there was a revenue jump of 454,389, with an increase in expenditure of 186,085, the record Queensland surplus of 396,115 being realised.[a] For 1907-8 the revenue increase was 180,486, while the expenditure increase was 461,299, and the surplus only 115,302.

Loan outlay also advanced to 1,033,676. Including the Commonwealth collections the total revenue for 1907-8 approached 5 millions, or nearly 1 million in excess of the most fruitful year before federation.

In November, 1906, a brief but important Act was pa.s.sed providing that all moneys received in payment for auction sales of town, suburban, and country lands, or of such lands if subsequently purchased by selection, should hereafter be paid into the Loan Fund Account. But proceeds of the land sold under the Special Sales of Land Act of 1901 were not included, those moneys having been already appropriated to the repayment of sums borrowed upon certain Treasury bills issued in aid of revenue in former years. It is the policy of the Kidston Government, however, not to alienate lands under the Special Sales Act; therefore the deficits of former years which had been liquidated with the proceeds of Treasury bills, and practically formed a floating debt, are being gradually compensated for by the transfer of annual surpluses to the Public Debt Reduction Fund, the total amount of stock thus cancelled having on 30th June, 1908, reached the respectable amount of 942,641 since the inception of the fund.

One of the wise determinations of Mr. Kidston as Treasurer was to keep off the London money market for several years at least after the rebuff received by his predecessor in 1903. Consequently he abstained from making any attempt to float a loan till March, 1909, when 2,000,000 worth of 3 per cent. stock was disposed of. The net proceeds were equal to 94 9s. 6d. per cent., a price about equivalent to that obtained by New South Wales a little earlier in the year. This, although dearer money than was obtained by issues of Queensland stock in the closing decade of the last century, compares not unfavourably with the prices obtained earlier in the financial year for other gilt-edged securities on the London market.

The net average rate of interest payable on the public debt of Queensland on 30th June, 1908, was 3 14s. 1d. per cent., but this rather high rate arose from the fact that more than a moiety of the total debt was incurred many years ago, when all Australian stocks bore 4 per cent. interest. The lowest average rate now paid by any Australian State is 3 8s. 9d. by Western Australia, most of whose stock was issued during the closing decade of the 19th century, and bears from 3 to 3 per cent.